The following were the yield and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 2.70% (-15bp)
UK: 3.0% (+7bp)
Germany: 1.89% (+4bp)
France: 2.51% (+3bp)
Spain: 4.40% (0bp)
Italy: 4.40% (0bp)
Japan: 0.71% (-1bp)
Portugal: 7.18% (+2bp)
Greece: 10.34% (+5bp)
Bond yields were for the most part little changed on Wednesday, in the run-up to this evening´s US Federal Reserve Chairman Ben Bernanke´s press conference. The exception was the UK market, where investors pushed yields higher after the minutes of the MPC´s latest meeting - released in the morning - showed that: "no member judged that further stimulus was appropriate at present."
GBP/USD also moved notably higher on the back of the aforementioned to then spike higher following the Fed´s announcement.
Contrary to most participants´ expectations, namely those of approximately two-thirds of the market, at today´s policy meeting the Federal Open Market Committee [FOMC] has opted to maintain the size of its asset purchase programme - known as QE - unchanged, at $85bn, as well as its main policy rate.
In his initial comments before the press Fed Chairman Bernanke referenced the recent tightening in financial conditions and the potential impact on employment and the labour market which that might have. He also mentioned the potential risks arising from current low levels of inflation.
Some economists´ first reaction has been to point out that in the absence of any tapering then towards the end of the year the central bank will purchasing the entire expected issuance of mortgage backed securities [MBS], which could lead to distortions in that market, for example, they claim. In that same vein, quite a few economists had based their expectations for Fed tapering on the fact that the monetary authority could conceivably end up monetizing the government´s debt as issuance levels decline alongside the falling fiscal deficit.
Investors also failed to react to late afternoon reports that US President Obama is willing to negotiate on budget questions but not as regards the federal debt ceiling.
Yesterday´s monthly US TIC Treasury data showed how China's holdings of US Treasuries increased by $1.5bn in July, or 0.1 percent, to $1.277trn.
Back in the Eurozone, market participants seemed unfazed by reports that Italian Prime Minister Silvio Berlusconi will look to relaunch his Forza Italia party.
As regards Spain, RBS wrote today that the country could miss its fiscal deficit target for 2013 as weak demand weighs on tax revenues. Nevertheless, "Spain has reformed its labour and pension market significantly, which has helped bring down unit labour costs (down almost 8% since 2009)," Alberto Gallo said.